CELH Seminar: 'Substantive Bargain as the Basis of Consideration in Contract'

Speaker: Dr Sonali Walpola (Australian National University)

Full title: 'Substantive Bargain as the Basis of Consideration in Contract: the argument based in case evidence, doctrinal coherence, and principle, and a discussion of the limited role of nominal consideration'

The doctrine of “consideration” was developed by common law judges of the 16th century to define the scope of liability in simple contract (‘contract’), which revolutionized the law by providing a wide-scale remedy for breach of promise when parties had not executed a deed. From the earliest cases to the present day, judges have conceptualized consideration as requiring a bargain between the parties. But what sort of bargain will suffice? While leading modern texts emphasise reciprocity as the distinguishing mark of consideration, in apparent contradiction, it is also assumed that a mere nominal consideration can be invoked to render a promise legally binding, e.g., as where A promises (without any coercion) to confer some valuable property upon B in exchange for a peppercorn or trivial sum. This study relies extensively on a historical analysis to reveal that the judicial enquiry into consideration, to the present day, relies on a substantive conception of bargain—in the sense of a real exchange where each party genuinely seeks some performance from the other. After a comprehensive review of cases featuring nominal consideration, I conclude that there is no evidence for the assumption that has crept into the exposition of contract doctrine, namely that an in-substance gratuitous promise can be made enforceable simply by citing a nominal consideration. The cases associated with nominal consideration fall into limited categories where there is an alternative explanation for enforcement, e.g., another legal obligation applies or consideration is cited where it is functionally redundant (e.g., in conveyances where it has persisted as a historical relic). It is further shown that conceptualizing consideration as a substantive requirement reveals a robust normative coherence that underlies the law of contract, which can assist in resolving questions about the extension of contractual liability to new settings.

Bio: Sonali is a Senior Lecturer in Law in the College of Business and Economics at the Australian National University. She teaches commercial law and taxation law. Sonali’s PhD involved a historical and contemporary analysis of the bases for enforcing promises at general law. In addition to promissory liability, Sonali researches the Australian High Court’s attitude to changing common law doctrines, and tax law and policy. Sonali has published in the Federal Law Review, the Oxford University Commonwealth Law Journal, the Australian Law Journal and Australian Tax Forum. Sonali is also the academic supervisor of the ANU Tax Clinic, which provides pro bono tax assistance to lower-income and vulnerable members of the community.

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Contact ra593@cam.ac.uk if you would like the paper.